A glimpse at AVI's impact: Areas on the up & up should prepare for taxes to go up, too

AS EXPECTED, many residents in gentrified Philly neighborhoods will get slammed when the city moves to its new property-tax system next year - at least according to City Controller Alan Butkovitz, a frequent critic of the new policy.

Butkovitz on Tuesday released his analysis of new property assessments that the city recently completed for the Actual Value Initiative, or AVI. He found that residents in Northern Liberties, Washington Square West, Germantown, Fitler Square and the area around the former Graduate Hospital will see some of the largest tax increases.

Butkovitz based his analysis on a 1.25 percent tax because that's the city's estimate of the lowest possible rate, but he predicts that it's much lower than the one City Council will adopt this spring.

Overall, he said, the results prove that the city's tax burden will shift dramatically from commercial-property owners to residents and that many Philadelphians will feel the pinch.

"It's going to squeeze a lot of people at a time of a tough economy," he said. "There are huge numbers of people who are not going to have the cash to be able to pay the tax difference."

According to the controller's data, residents in some neighborhoods may find the increases especially burdensome. For instance, in the Cedar Park section of West Philadelphia, where the median household income is $32,059, tax bills could go up by thousands.

The Nutter administration says that it is open to relief measures aimed at lessening the burden for homeowners and that the new system - aimed at fixing the city's grossly inaccurate list of assessed property values - will make the system more fair.

"People had no idea where their values came from. . . . This will all be straightforward," Finance Director Rob Dubow said. "The policy question is, are there things you want to do to mitigate the impact to residential-property owners?"

Over the next several months City Council will debate how best to protect homeowners under AVI. But any relief measures will cause the tax rate to increase.

"No matter what safeguards you put in place, it will drive up the rate," said Councilman Mark Squilla, whose 1st District includes Northern Liberties, Fishtown and Center City. "You've got to help people who are hurting the most. That's the tricky part."

A gentrification bill that would provide relief to longtime residents and a homestead exemption that would lower assessments by $30,000 for homeowners are on the table. Councilman Bill Green recently introduced a bill to eliminate the homestead exemption, a move that has been met with opposition. Squilla plans to try to amend the exemption so that it would apply to 5 percent of a home's assessment.

"If a homestead exemption is enacted and applied, a majority of homeowners under AVI would see decreases in their tax bill," said Councilman Wilson Goode Jr. "We should look to benefit as many homeowners as possible."

On average, according to data provided to Council by the administration, the 1st, 2nd and 5th Council districts will see the greatest increases.

With a 1.25 percent rate, 60 percent of residents are likely to see higher taxes. The tax bills of 633 homeowners will increase by more than $5,000, although most other increases will be modest. And if the rate is increased to 1.4 percent, which could happen if Council adopts the homestead exemption, more than three-quarters of city homeowners will see increases. According to the controller's data, more than 107,000 single-family households in areas like Chestnut Hill, Bustleton, Somerton, Eastwick and Elmwood could see their tax bills drop by a few hundred dollars under the lower rate.

Starting Friday, the city will mail out assessments that will affect 2014 tax bills.